Any donation from a Non-resident Indian who is a foreign national can be received only if the recipient charitable trust or institution is registered under FCRA (Foreign Contribution Regulation Act, 2010).
Main purpose of Foreign Contribution Regulation Act (FCRA), 2010
FCRA, 2010 has been enacted by the Parliament to
consolidate the law to regulate the acceptance and utilization of foreign contribution
or foreign hospitality by certain individuals or associations or companies and
to prohibit acceptance and utilization of foreign contribution or foreign
hospitality for any activities detrimental to national interest and for matters
connected therewith or incidental thereto.
Applicable
Foreign
Contribution (Regulation) Act, 2010 (FCRA, 2010) has come into force with
effect from 1st May, 2011 as an improvement over the existing FCRA 1976 and
with wider applicability.
Who are covered under the
FCRA Act, 2010
All
Charitable, Educational, Social, Cultural, Religious, Political organisation,
Societies, Trusts, Companies, etc., are covered under the FCRA Act, 2010.
Donation given by an individual of Indian origin and
having foreign nationality is treated as ‘foreign contribution’
Donation
from an Indian who has acquired foreign citizenship is treated as foreign
contribution. This will also apply to PIO card holders and to Overseas Citizens
of India. However, this will not apply to ‘Non-resident Indians’, who still
hold Indian citizenship.
In terms of FCRA, 2010 “person” includes ‒
(i) an
individual;
(ii) a Hindu
undivided family;
(iii) an
association;
(iv) a
company registered under section 8 of Companies Act, 2013).
Meaning
of Foreign Contribution [Section 2(h) of Foreign
Contribution (Regulation) Act (FCRA), 2010]
As per section 2(h) of Foreign
Contribution (Regulation) Act (FCRA), 2010 “Foreign Contribution” means the
donation, delivery or transfer made by any foreign source, of any—
(i) article,
other than the article given to a person as a gift for his personal use, if the
market value, in India, of such article, on the date of such gift, is not more
than the sum specified from time to time, by the Central Government by the
rules;
(ii) any currency,
whether Indian or foreign;
(iii) any security
as defined in section 2(h) of the Securities Contract (Regulation) Act, 1956
(42 of 1956) and includes any foreign security as defined in section 2(o) of
the Foreign Exchange Management Act, 1999 (42 of 1999).
NOTE:
v “Foreign
Contribution” includes all kinds of foreign receipts. It does not distinguish
between a commercial receipt or a voluntary contribution.
v Deemed
Foreign Contribution – “Interest income on Foreign Contribution and any income
derived from foreign contribution or interest thereon.
“FOREIGN CONTRIBUTION” INCLUDES
Foreign contribution
received either directly or through one or more persons (Explanation 1).
The interest accrued on
the foreign contribution deposited in any bank referred to in section 17(1) of
FCRA, 2010 or any other income derived from the foreign contribution or
interest thereon (Explanation 2).
EXCLUSION FROM “FOREIGN
CONTRIBUTION”
Any amount received, by
any person—
(i) from any foreign
source in India, by way of fee (including fees charged by an educational
institution in India from foreign student), or
(ii) towards cost in lieu
of goods or services rendered by such person in the ordinary course of his
business, trade or commerce whether within India or outside India, or
(iii) by way of
contribution from an agent of a foreign source towards such fee or cost. [Explanation
3 to section 2(h)]
Foreign
Hospitality [Section 2(i)]
AS PER SECTION 2(i) OF
FCR ACT
“Foreign Hospitality”
means any offer, not being a purely casual one, made in cash or kind by a
foreign source for providing a person with the costs of travel to any foreign
country or territory or with free boarding, lodging, transport or medical
treatment.
NOTE:
(i) Central Government
has the power under section 9 to prohibit the receipt of foreign hospitality or
requirement of prior permission/intimation to Central Government where such
acceptance is likely to be prejudicial to sovereignty and integrity of India,
public interest, freedom or fairness of election, friendly relations or
harmony.
(ii) Member of a
Legislature or office-bearer of a political party or Judge or Government
servant or employee of any corporation or any other body owned or controlled by
the Government, while visiting any country or territory outside India, not
allowed to accept foreign hospitality, except with the prior permission of the
Central Government (Section 6). Except in some situations like illness, medical
grounds where intimation can be given subsequently within 1 month.
Sources
of foreign funds [Section 2(j)]
There are following
sources from which foreign contribution is allowed and receipt of foreign
contribution from these sources will be treated as foreign funds:—
“Foreign Source”
includes,
(i) the Government
of any foreign country or territory and any agency of such Government;
(ii)
any international agency, not
being the United Nations or any of its specialised agencies, the World Bank,
International Monetary Fund or such other agency as the Central Government may,
by notification, specify in this behalf;
(iii)
a foreign company;
(iv)
a corporation, not being a foreign company, incorporated in a foreign
country or territory;
(v) a multi-national corporation referred
to in sub-clause (iv) of clause (g);
(vi)
a company within the meaning of the Companies Act, 1956 (1 of 1956), and more
than one-half of the nominal value of its share capital is held, either singly
or in the aggregate, by one or more of the following, namely:—
(A) the Government of a foreign country or
territory;
(B) the citizens of a foreign country or
territory;
(C)
corporations incorporated in a foreign country or territory;
(D)
trusts, societies or other associations of individuals (whether incorporated or
not), formed or registered in a foreign country or territory;
(E) foreign company;
(vii) a trade union in any foreign country
or territory, whether or not registered in such foreign country or territory;
(viii)
a foreign trust or a foreign foundation, by whatever name called, or
such trust or foundation mainly financed by a foreign country or territory;
(ix)
a society, club or other association
of individuals formed or registered outside India;
(x) a citizen
of a foreign country;
NOTE:
(i) FCRA funds of Indian
Non-Government Organizations (NGOs) cannot be utilized for activities outside
India, i.e., only domestic funds can be used.
(ii) Indian
Non-Government Organizations (NGOs) are not permitted to have activities or
branches outside India, unless they are registered under section 10(23C).
“INTEREST OR DIVIDEND”
The “interest” or
“dividend” generated should be accounted for as amount received by way of
interest on deposit drawn out of funds received from a foreign source. In other
words, even the interest/dividend received in India in Indian rupees must be
disclosed in the Return Form FC-3.
Who
can receive foreign contribution?
Under Foreign
Contribution (Regulation) Act (FCRA), 2010, only persons having a definite
cultural, economic, educational, religious or social programme are eligible to
receive foreign contribution, provided they are either registered with, or have
obtained prior permission from the Central Government. For seeking
registration, an association must be registered as a ‘trust’, ‘society’ or a
‘non-profit company’; should have been in existence for over three years and
should have undertaken reasonable amount of activity in its chosen field for
the benefit of society.
An association that is
not able to fulfill the aforesaid conditions for registration, may apply for
prior permission for receiving the foreign contribution and must be able to
demonstrate that it has a reasonable project that benefits society and for which
the contribution will be used. Permission is valid only for the specific
amount, purpose and source in respect of which the application is made. The
registration granted under FCRA 1976 used to be valid perpetually, unless
specifically revoked. However, the registration granted under FCRA 2010 shall
remain valid for a period of 5 years and can be renewed from time to time
thereafter pursuant to further applications to be submitted 6 months before the
date of expiry of the certificate of registration.
Foreign Contribution
(Regulation) Act (FCRA), 2010 provides that registration or prior permission
may be granted within 90 days of an application in this regard at the absolute
discretion of the government, though no penalty/consequence is provided if delayed
beyond 90 days. In case of rejection, reasons for the same should be
communicated to the applicant.
Prohibition to accept foreign
contribution [Section 3]
As defined in Section 3(1) of FCRA,
2010, the following are prohibited to receive foreign contribution: (a)
candidate for election;
(b) Correspondent, columnist,
cartoonist, editor, owner, printer or publisher of a registered newspaper;
(c) Public Servant, Judge,
Government servant or employee of any corporation or any other body controlled
or owned by the Government;
(d) Member of any legislature;
(e) Political party or office
bearer thereof;
(f) organization of a political
nature as may be specified under sub-section (1) of Section 5 by the Central
Government.
(g) association or company engaged
in the production or broadcast of audio news or audio visual news or current
affairs programmes through any electronic mode, or any other electronic form as
defined in clause (r) of sub-section (1) of Section 2 of the Information
Technology Act, 2000 or any other mode of mass communication;
(h) Correspondent or columnist,
cartoonist, editor, owner of the association or company referred to in point
(g).
(i) Individuals or associations who
have been prohibited from receiving foreign contribution.
Application
electronically
All
applications, intimations etc. under the Act have to be sent to Secretary,
Ministry of Home Affairs, Government of India, FCRA Wing/Foreigners Division,
Jaisalmer House, 26, Mansingh Road, New Delhi 110011. – These have to be
submitted electronically only.
Reporting
Foreign Contributions
Under the Foreign Contribution
(Regulation) Act, (FCRA), 2010 all not-for profit organizations in India (e.g.,
public charitable trusts, societies and section 8 companies) having a definite
cultural, social, educational, religious and economic object shall accept
foreign contributions only after satisfying two conditions:—
(a) It must register
itself with the Central Government; and
(b) It must be agree to
receive foreign contribution only through one specific designated bank account.
v Furthermore,
not-for-profit entities must report to the Central Government regarding foreign
contributions received, within 30 days of their receipt, and
v Must
file annual reports with the Ministry of Home Affairs. The entity must report
the amount of the foreign contribution, its source, the manner in which it was
received, the purpose for which it was intended, and the manner in which it was
used.
v Foreign
contributions include currency, securities, and articles, except personal gifts
under 1,000 (approximately USD 20).
v Funds
collected by an Indian citizen in a foreign country on behalf of a
not-for-profit entity registered in India are considered foreign contributions.
v Moreover,
funds received in India, in Indian currency, if from a foreign source, are
considered foreign contributions.
Restrictions
on transfer of Foreign Contribution
A registered person or a
person who has obtained prior permission to receive foreign contribution for
any specific purpose, is allowed to transfer a maximum of 10% of such foreign
contribution, to other persons who are not registered or who have not obtained
prior permission under FCRA 2010, only after obtaining the prior approval of
the Central Government.
FCRA
2010 prohibits administrative expenditures exceeding 20% of an organization’s
total expenditures [Section
8 (1) (b) of the FCRA, 2010]
Foreign contribution when
received is required to be utilised for the purposes for which it has been
received/permitted except for speculative business. The utilization of foreign
contribution to defray the administrative expenses is permitted up to the
extent of 20% of total foreign
contributions received in a financial year. However, if more than 20% amount is proposed to be utilized
for such expenses prior approval of Central Government shall be required.
What is administrative expenses?
The
following shall constitute administrative expenses:-
(i) salaries, wages, travel expenses or any
remuneration realised by the Members of the
Executive Committee or Governing Council
of the person;
(ii) all expenses towards hiring of personnel for
management of the activities of the person
and salaries, wages or any kind of
remuneration paid, including cost of travel, to such
personnel;
(iii) all expenses related to consumables like
electricity and water charges, telephone
charges, postal charges, repairs to
premise(s) from where the organisation or Association is
functioning, stationery and
printing charges, transport and travel charges by the Members
of the Executive Committee or
Governing Council and expenditure on office equipment;
(iv) cost of accounting for and administering
funds;
(v) expenses towards running and maintenance of
vehicles;
(vi) cost of writing and filing reports;
(vii) legal and professional
charges; and
(viii) rent of premises, repairs to
premises and expenses on other utilities:
Types
of Foreign Contribution Regulation Act (FCRA) Registration
There are 2 kinds of
Foreign Contribution Regulation Act certificates:—
(a) Prior consent
certification which is possible after one year.
(b) Long-term certificate
for 5 years.
(a) FOR PRIOR APPROVAL
THESE CRITERIA SHOULD BE FULFILLED:—
(i) Prior authorization
certificate is provided to those NGOs who have finished a minimum of one year
in running.
(ii) The non-government
organization has to offer the list of foreign benefactors in addition to their
addresses, classifications and cause for which they are donating.
(iii) The public welfare
organization needs to point out the overall quantity of cash which is being
received as a foreign donation.
(b) *FOR FOREIGN
CONTRIBUTION REGULATION ACT (FCRA) CERTIFICATION FOR 5 YEARS, THESE CRITERIA
SHALL BE SATISFIED:—
(i) The Non-Government
Company must be three years old.
(ii) Last 3 years annual
report, audit report should be sent.
(iii) Copy of PAN card,
Bye-laws of the NGO shall also be offered.
* After 5 years, FCRA
certification must be renewed. This guideline will be executed from the year
2015.
Benefits
of Foreign Contribution Regulation Act Registration
The NGO can approach
different foreign financing companies after FCRA registration. Some of them are
as follows:—
(i) British High
Commission
(ii) Bill and Melinda
Gates Foundation
(iii) Oxfam
(iv) For Foundation
(v) SWISSAID
(vi) Infinity Foundation
(vii) BORDA (Germany)
(viii) Canadian High
Commission
(ix) New Zeeland High
Commission
(x) Findhorn Foundation
(xi) GIFRID (Israel)
(xii) European Commission
(EC)
(xiii) UNESCO
(xiv) AUSAID
(xv) Japanese Embassy
For
Foreign Funding
v Prior
permission
v Permanent
registration
Procedure
for Permanent Registration
v LOG
ON WWW.MHA.NIC.IN
v FILL
UP THE FORM FC-3
Documents
required for FCRA Registration
Following documents
should be enclosed with the application for grant of registration:—
(i) Certified copy of
registration of society or trust deed, as the case may be.
(ii) Copies of the
audited statements of accounts for the last 3 years. (Assets & liabilities,
Receipt and Payment, Income and expenditure account).
(iii) Copies of the
annual report of last three years.
(iv) Details of
activities during last three years.
(v) Bank’s information.
v Bank’s
name, Account number and Bank’s address
(vi) List of governing
body.
v Name,
Father’s name, Occupation, designation and Address
(vii) Name of the chief
functionary and his mobile number.
(viii) Phone number of
the office.
(ix) Copy of PAN Card of
the Society/Trust.
Eligibility
criteria for registration
An Organization in
formative stage is not eligible for registration. Such Organization may apply
for grant of prior permission under the law.
For obtaining
registration under the FCRA, the applicant association should preferably be
(a) registered under any
of the following Acts:-
(i)
Societies Registration Act, 1860
(ii)
Indian Trusts Act, 1882
(iii)
Charitable and Religious Trusts Act,
1920
(iv)
Companies Act, 2013 (Section 8)
(b) submit commitment
letter from the donor; and
(c) submit copy of
project for which foreign contribution is solicited/is being offered.
Financial Threshold
Normally
be in existence for at least three years and has undertaken reasonable activity
in its chosen field for the benefit of the society for which the foreign
contribution is proposed to be utilised. For this purpose, the association
should have spent at least Rs. 10,00,000/- over the last three years on its
activities, excluding administrative expenditure. Statements of Income &
Expenditure, duly audited by Chartered Accountant, for last three years are to
be submitted to substantiate that it meets the financial parameter.
Aadhaar number, Passport
or OCI card mandatory for prior permission or registration under FCRA [Section
12A of FCRA inserted vide Foreign Contribution (Regulation) Amendment Act, 2020
with effect from 29.09.2020.
Notwithstanding anything contained in this Act, the
Central Government may require that any person who seeks prior permission or
prior approval under section 11, or makes an application for grant of
certificate under section 12, or, as the case may be, for renewal of
certificate under section 16, shall provide as identification document, the
Aadhaar number of all its office bearers or Directors or other key
functionaries, by whatever name called, or a copy of the Passport or Overseas
Citizen of India Card, in case of a foreigner –
NOTE : This amendment has been held valid in Noel
Harper v. UOI (2022) 137 taxmann.com 130 (SC).
Conditions
for the grant of Registration
(a) The ‘person’ making an application for
registration—
(i)
is not fictitious or benami;
(ii)
has not been prosecuted or convicted for indulging in activities aimed at
conversion through inducement or force, either directly or indirectly, from one
religious faith to another;
(iii)
has not been prosecuted or convicted for creating communal tension or
disharmony in any specified district or any other part of the country;
(iv)
has not been found guilty of diversion or mis-utilisation of its funds;
(v)
is not engaged or likely to engage in propagation of sedition or advocate
violent methods to achieve its ends;
(vi)
is not likely to use the foreign contribution for personal gains or divert it
for undesirable purposes;
(vii)
has not contravened any of the provisions of this Act;
(viii)
has not been prohibited from accepting foreign contribution;
(ix)
the person being an individual, such individual has neither been convicted
under any law for the time being in force nor any prosecution for any offence
is pending against him;
(x)
the person being other than an individual, any of its directors or office
bearers has neither been convicted under any law for the time being in force
nor any prosecution for any offence is pending against him.
(b)
The acceptance of foreign contribution by the association/person is not likely
to affect prejudicially—
(i)
the sovereignty and integrity of India;
(ii)
the
security, strategic, scientific or economic interest of the State;
(iii)
the public interest;
(iv)
freedom or fairness of election to any
Legislature;
(v)
friendly relation with any foreign
State;
(vi)
harmony between religious, racial, social, linguistic, regional groups, castes
or communities.
(c)
The acceptance of foreign contribution—
(i)
shall not lead to incitement of an offence;
(ii)
shall not endanger the life or physical safety of any person.
Registration
or prior permission under FCRA to be granted within 90 days
There is no specific time
limit for making an application for registration. Both, ‘Registration’ and
‘Prior Permission’ shall be granted or rejected within a period of 90 days from
the date of receipt of application. Currently this time frame is stipulated
only for applications for Prior Permission. If registration is not granted, reasons will be communicated within 90
days [section 12(3) of FCRA, 2010].
Such
reasons need not be given for the same reasons for which any information or
document is not required to be given under Right to Information Act, 2005
[section 12(5) of FCRA, 2010]
Validity of registration is for five years
Registration is granted for a period of five years
[section 12(6) of FCRA, 2010 and rule 12 of Foreign Contribution (Regulation)
Rules, 2011].
Renewal
of Registration
All existing NGOs have to
renew their registration at the end of the period of 5 years from the date of
enactment of FCRA 2010. In other words, Registration of NGOs to be renewed
every 5 years. The application for the renewal must be made six months prior to
the expiry of registration.
One
bank a/c should be open
One bank a/c should be
open for receiving Foreign contribution. Multi a/c can be opened for
utilization but intimation to Ministry within 15 days.
It is mandatory for
existing NGOs to open ‘FCRA account’ in SBI, Sansad Marg, Main branch, New
Delhi
FCRA registered NGO shall have to open ‘FCRA
account’ in SBI, Sansad marg, Main branch, New Delhi for receipt of foreign
contribution. Organisations located anywhere in India can open and maintain
designated FCRA account at SBI, Main branch, New Delhi without visiting
physically to New Delhi. In this regard, a detailed SOP of State Bank of India
is available in public domain on the portal of SBI & FCRA.
Existing bank account
other than SBI can not receive foreign contribution?
As per amendment under FCRA, 2010, no organization
shall receive foreign contribution in any bank/ branch account other than SBI,
Main branch, New Delhi.
No foreign contribution can be transferred by the
recipient to any other NGO/person
An
association having registration or prior permission can not transfer the Foreign
Contribution received by it to another organization.
Foreign
contribution cannot be mixed with local receipts
Foreign contribution
should not be mixed with local funds being handled by the organization.
Foreign
contribution can be received in rupees
Any amount received from
‘foreign source’ in rupees or foreign currency is construed as ‘foreign
contribution’ under law. Such transactions even in rupees term are considered
foreign contribution.
Requirement
of Audit
The Central Government
has the power to initiate audit under the following circumstances:—
(i) If the organization
or the association fails to file any returns within the time limit specified.
(ii) The returns
submitted by the organization are not in accordance with the law.
(iii) If during the
inspection/scrutiny of the returns submitted, the Central Government comes
across any evidence or information which provides reasonable cause to believe
that any provisions of the Act have been violated.
NOTE:
During the course of
audit and inspection of books of accounts, the authorized officer also has the
power to seize the accounts and records in the presence of two independent
witnesses. (Section 24)
Mandatory
nature of Return
It is mandatory to file
for FC-3 every year as long as the organization wants to validly retain its
registration. Even if Foreign Contribution not received during the year
organization having registration under FCRA should file the NIL Return.
Online submission of annual returns is mandatory
Annual
returns are to be filed online at https://fcraonline.nic.in. No hard copy of
the returns shall be accepted in FCRA Wing of Ministry of Home Affairs.
Last date for online filing of returns
Ans.
The return is to be filed online for every financial year (1st April to 31st
March) within a period of nine months from the closure of the year i.e. by 31st
December each year.
Procedure for filing Annual Returns
The
Annual return is to be submitted online at https://fcraonline.nic.in in
prescribed Form FC-4, duly accompanied by balance sheet and statement of
receipt and payment, which is certified by a Chartered Accountant.
Submission
of a ‘NIL’ return, even if there is no receipt/utilization of foreign
contribution during the year, is also mandatory. However, in such case,
certificate from Chartered Accountant, audited statement of accounts is not
required to be uploaded. Annual Return are to be filed online at
https://fcraonline.nic.in
Prescribed forms for filing with the Foreign
Contribution Regulation Act (FCRA) are FC-3 and FC-4
FC-3:
Used for applications for registration and prior permission
FC-4:
Used for annual returns
For how many years an association which has been
granted prior permission to receive foreign contribution should file the
mandatory annual return?
The
association should file the mandatory annual return on a yearly basis, till the
amount of foreign contribution is fully utilized. Even if no transaction takes
place during a year, a NIL return should be submitted.
Consequences of not filling the annual returns on time
An
association not filing annual return on time may face the following
consequences:
(a)
Imposition
of penalty for late submission of return.
(b)
Cancellation
of registration
(c)
Prosecution
for violation of provisions of FCRA, 2010.
Cancellation
of FCRA Registration [Section 14]
There are following
reasons where an NGO’s foreign funding registration can be cancelled on
conditions such as:—
(i) The fund given by the
foreign contributor is not made use of correctly and used for own individual
interest,
(ii) The NGO falls to
submit yearly compliance for three successive years,
(iii) Any member of the
company submits a complaint that the NGO is not working effectively and if it
is proved,
(iv) If organization is
considered to be of political nature,
(v) Failure to renew your
registration after five years,
(vi) Lack of reasonable
activities for two years,
(vii) Providing false
information,
(viii) Violating terms
& conditions of filling returns,
(ix) Violating the Acts
and rules, and
(x) Acting against public
interest.
NOTE
No
such order shall be made unless the concerned person has been given reasonable
opportunity of being heard.
Appeal before
High Court
Appeal
against the order of refusing registration or permission lies with High Court
under section 31(2) of FCRA.
Suspension of Certificate
§ Where Central Government
is satisfied that pending consideration of the question of cancelling the
certificate on any of the grounds mentioned above, it is necessary to suspend
the certificate, may suspend.
§ Once cancelled, the
person shall not be eligible for registration for a period for 3 years from the
date of such cancellation.
§ The Central Government
may suspend the certificate for a period of 180 days, or such further period,
not exceeding 180 days, as may be specified]
§ Every person whose
certificate has been suspended shall –
(a)
not
receive any foreign contribution during the period of suspension of certificate
(b) utilise the contribution
with the approval of the central government.
Amount
to be Spent in Case of Suspension
(a) In case
the certificate of registration is suspended under sub-section (1) of section
13 of the Act, up to 25% of the unutilised amount may be spent, with the prior
approval of the Central Government, for the declared aims and objects for which
the foreign contribution was received.
(b) The remaining 75% of the unutilized foreign
contribution shall be utilised only after revocation of suspension of the
certificate of registration.
Consequences
of cancellation
For 3 years neither new
FCRA number can be applied for nor the association can ask for Prior Permission
(Section 15). All the foreign contribution and assets thereof (created since
the inception of the organization) shall vest with such authority as may be
prescribed till the registration is restored.
Inform the Central Government if foreign contributions receive more than Rs. 10,00,000 in foreign contributions from relatives in a financial year [Rule 6 of the Foreign Contribution (Regulation) Rules, 2011]
§ Rule 6 of the Foreign Contribution (Regulation)
Rules, 2011 (FCRR) requires people to inform the Central Government if they
receive more than Rs. 10,00,000 in foreign
contributions (FC) from relatives in a financial year.
§ The information must be provided to Central Government within three
months of receiving the FC, in Form FC-1, and uploaded electronically
online. The definition of relatives is provided in section 2(1)(r) of the
Foreign Contribution (Regulation) Act, 2010.
§ Registered entities are not required
to furnish intimation of quarterly receipt of foreign contribution
§
The
time limit for intimating change of names, aims, objectives or key members of
the association has been increased to 45 days.
When articles gifted for personal use do not amount to foreign contribution. [Rule 6A of the Foreign Contribution (Regulation) Rules, 2011]
Any article gifted to a person for his
personal use whose market value in India on the date of
such gift does not exceed Rs. 25,000
shall not be a foreign contribution within the meaning of sub-clause (i) of
clause (h) of sub-section (1) of section (2).”
Application for obtaining 'registration' or 'prior permission' to receive foreign contribution [Rule 9 of the Foreign Contribution (Regulation) Rules, 2011]
FCRA Registered
persons/associations (previously or presently) must submit Form FC-6D within 45
days.
Fees payable with application
An application made for
the grant of prior permission shall be accompanied by a fee of rupees five
thousand only, which shall be paid through the payment gateway specified by the
Central Government – Rule 9(4)(a) FC(R) Rules as amended on 10.11.2020.
An application made for the grant of registration shall be accompanied by a fee of rupees ten thousand only, which shall be paid through the payment gateway specified by the Central Government – Rule 9(4)(b) of FC(R) Rules as amended on 10.11.2020.
Declaration of receipt of foreign contribution [Rule 13 of the Foreign Contribution (Regulation) Rules, 2011]
Registered entities are
not required to furnish intimation of quarterly receipt of foreign contribution.
Bank may credit any foreign contribution received by an Association to its account even if the association does not have registration/prior permission from Ministry of Home Affairs (MHA) and subsequent reporting can be made by Banks to MHA [Rule 16 of the foreign contribution (Regulation) Rules, 2011 (FCRR, 2011)]
Ans. Rule 16 (1) of FCRR, 2011 states that every
bank shall send a report to the Central Govt. within 30 days of receipt of
foreign contribution by any person who is required to obtain a certificate a
registration or prior permission under the Act, but who was not granted such
certificate or prior permission on the date of receipt of such remittance.
Further, Rule 16(3) prescribes that the banks shall send a report to the Central Govt. within 30 days from the date of such last transaction in respect of receipt of any foreign contribution in excess of Rs.1 Crore or equivalent thereto in a single transaction or in transactions within a duration of 30 days, by any person whether registered or not under the Act.
In the event of receipt of foreign contribution in excess of one crore rupees in a financial year
In case a person who has
been granted a certificate of registration or prior permission receives foreign
contribution in excess of one crore rupees, or equivalent thereto, in a
financial year, he/it shall place the summary data on receipts and utilisation
of the foreign contribution pertaining to the year of receipt as well as for
one year thereafter in the public domain.
Besides, the Central Government shall also display or upload the summary data of such persons on its website for information of the general public.
Foreign contribution through scheduled bank [Rule 17 of the foreign contribution (Regulation) Rules, 2011 (FCRR, 2011)]
Every person who has
been granted certificate or prior permission under section 12 shall receive
foreign contribution only in an account designated as “FCRA Account” by the
bank, which shall be opened by him for the purpose of remittances of foreign
contribution in such branch of the State Bank of India at New Delhi, as the
Central Government may, by notification, specify in this behalf:
Provided also that no funds other than foreign contribution shall be received or deposited in any such account
Change of designated bank account, name, address, aims, objectives or Key members of the association [Rule 17A of the Foreign Contribution (Regulation) Rules, 2011]
The
time limit for intimating changes under Forms FC-6A, FC-6B, FC-6C, FC-6D or
FC-6E is increased to 45 days.
Revision of an order passed by the competent authority under Section 32 of the Act [Rule 20 of the Foreign Contribution (Regulation) Rules, 2011]
Application for revision
of an Order cannot be made on “a plain paper”. It must be filed in the
prescribed format electronically.
Provision
for compounding of offences
FCRA 2010 provides for
‘compounding of offences’ which was absent in FCRA 1976. However, the defaulter
is required to approach the compounding authority before institution of
prosecution. The Central Government has prescribed the categories of offences under
FCRA 2010 that can be compounded and has also specified the amount of penalty
and compounding fee payable for the same. Upon completion of the compounding
proceedings, the defaulter is granted immunity from prosecution in respect of
the offence compounded.
The
following table shows the offences which are compoundable under FCRA along with
the penalties for contravention of the provisions of FCRA:
|
S. No. |
Offence |
Amount of Penalty |
Officer competent for Compounding |
|
1. |
Offence punishable under Section 35 for accepting
any hospitality in contravention of Section 6 (Intimation of receiving
foreign contribution from relatives). |
Rs. 10,000 ($130) |
Director/Deputy Secretary in-charge |
|
2. |
Offence punishable under Section 37 for transferring any foreign
contribution to any other person in contravention of Section 7 of the Act or
any rule made thereunder: PROVIDED that transfer of foreign
contribution (inclusive of more than one instances of transfer, if any) shall
be compoundable only once. |
Rs. 1,00,000 ($1300) or ten percent (10%) of such
transferred foreign contribution, whichever is higher. |
Director/Deputy Secretary in-charge |
|
3. |
Offence punishable under Section 37 for defraying of foreign
contribution beyond twenty per cent of the contribution received for
administrative expenses in contravention of Section 8 of the Act. |
Rs. 1,00,000 ($1300) or five percent (5%) of such
foreign contribution so defrayed beyond the permissible limit, whichever is
higher |
Director/Deputy Secretary in-charge |
|
4. |
Offence punishable under Section 35 for accepting foreign contribution
in contravention of Section 11(mandatory registration or prior permission
from the Central Government before receiving foreign contribution). |
Rs. 1,00,000 ($1300) or thirty percent (30%) of the
foreign contribution received, whichever is higher |
Director/Deputy Secretary in-charge |
|
5. |
Offences punishable under Section 37 read with Section 17 of the Act
for- (a) receiving foreign contribution in any account other
than specified account in his application for grant of certificate; (b) non-reporting the prescribed amount of foreign
remittance or source and manner of such remittance by banks and authorised
persons. (c) receiving and depositing any fund other than foreign
contribution in the account or accounts opened for receiving foreign
contribution or for utilising the foreign contribution. |
Rs. 1,00,000 ($1300) or five percent (5%) of the foreign contribution
received in such account, whichever is higher; Rs. 1,00,000 ($1300) or three percent (3%) of the foreign
contribution received or deposited in such account, whichever is higher. Rs. 1,00,000 ($1300) or two
percent (2%) of such deposit, whichever is higher. |
Director/Deputy Secretary in-charge |
|
6. |
Offence punishable under Section 37 for non-furnishing of intimation of
the amount of each foreign contribution received and the source from which
and in the manner in which, such foreign contribution is received as required
under Section 18 of the Act. |
Rs. 1,00,000 ($1300) or five percent (5%) of the
foreign contribution received during the period of non- submission, whichever
is higher. |
Director/Deputy Secretary in-charge |
|
7. |
Offence punishable under Section 37 for not maintaining the account and
records of foreign contribution received and manner of its utilisation as
required Section 19 of the Act. |
Rs. 1,00,000 ($1300) or five percent (5%) of the
foreign contribution during the relevant period of non-maintenance of
accounts, whichever is higher. |
Director/Deputy Secretary in-charge |
|
8. |
Offence punishable under Sections 3, 11 and 35 of the Act read with
rule 6 for failure to intimate about receipt of foreign contribution within
the prescribed time limit. |
Five per cent (5%) of such foreign contribution
received in a financial year |
Director/Deputy Secretary in-charge |
|
9. |
Offence punishable under Section 37, Section 17 and Section 19 of the
Act read with clause (e) of sub-rule (1) of rule 9 for failure to intimate
about opening of account or accounts within the prescribed time. |
Rs. 10,000 ($130) per utilisation account for
failure to intimate within the prescribed time. |
Director/Deputy Secretary in-charge |
|
10. |
Offence punishable under Section 37, Section 17 and Section 19 of the
Act read with clause (e) of sub-rule (2) of rule 9 for failure to intimate
about opening of account or accounts within the prescribed time. |
Rs. 10,000 ($130) per utilisation account for
failure to intimate within the prescribed time. |
Director/Deputy Secretary in-charge |
|
11. |
Offence punishable under Section 37, Section 11 and Section 17 of the
Act read with rule 17A, for failure to intimate about details within the
prescribed time |
Rs. 10,000 ($130) or thirty per cent (30%) for each
violation of failure to intimate within the prescribed time |
Director/Deputy Secretary in-charge |
|
12. |
Offence punishable under Section 37 and Section 19 of the Act read with
rule 13, for failure to place on website as prescribed in clause (a) of rule
13 within the prescribed time. |
Rs. 10,000 ($130) for each violation. |
Director/Deputy Secretary in-charge |
Subject : Submission of Applications for Revision of
Orders under Section 32 of the Foreign contribution (Regulation) Act, 2010,
Read With Rule 20 of The Foreign contribution (Regulation) Rules, 2011
In exercise of the powers under rule
20 of the Foreign Contribution (Regulation) Rules, 2011 as amended vide gazette
notification No. 506(E), dated 01.07.2022, it is hereby ordered that w.e.f. 1st
September 2022 an application under section 32 of the Act for revision of an
order passed by the competent authority shall be made in electronic form only
through the website https://fcraonline.nic.in.
Frequently asked questions regarding
online submission of application for revision of an order passed by the
competent authority under section 32 of the FCRA, 2010.
Q.1 Who is eligible to submit revision application?
Ans. Any person who is registered under the
ForeignContribution (Regulation) Act, 2010 (FCRA 2010) and rules made
thereunder and is aggrieved of an order of the Central Government may prefer
revision application in terms of section 32 of the FCRA 2010 and rule 20 of the
ForeignContribution (Regulation) Rules, 2011 (FCRR 2011).
Q.2 How can an association file an application for
revision of an order passed by the competent authority under FCRA, 2010?
Ans. An application for revision of an order shall be
made to the Secretary, Ministry of Home Affairs, Government of India, New Delhi
in electronic form only.
Q.3 Can revision application be sent through physical
mode (on paper mode)?
Ans. No. With effect from 15 August
2022, applications are acceptable only in electronic mode.
Q.4 What is the procedure for an association to file
an application for revision of an order passed by the competent authority under
FCRA, 2010?
Ans. Any organization who wants to file an application
for revision of an order passed by the competent authority may upload a scanned
copy of its application on the FCRA web portal (https://fcraonline.nic.in/).
Under main heading "Services under FCRA", Sub heading "Revision
Application against Section 32, FCRA 2010".
Q.5 Is it required to send physical copy of
electronically filed revision application to Ministry of Home Affairs (MHA)?
Ans. There is no need to send physical copy of
revision application or any related document to MHA.
Q.6 Is there any format of revision application?
Ans. No. Scanned copy of duly signed application in
plain paper is acceptable.
Q.7 Is applicant required to submit justification for
revision of Order?
Ans. Yes. Justification for revision of Order must be
submitted online along with the supporting documents, if any.
Q.8 What is the fee for making an application for
revision of an order passed by the competent authority under FCRA, 2010?
Ans. A fee of Rs. 3000/- (Three Thousand only) must be
paid through the payment gateway specified by the Central Government.
Q.9 What is the time limit for making an application
for revision of an order passed by the competent authority under FCRA, 2010?
Ans. The application must be made within one year from
the date on which the order in question was communicated or the date on which
it otherwise came to know of it, whichever is earlier.
Belated filing of annual returns by petitioner company registered under Foreign contribution (Regulations) Act, 2010 was to be permitted where petitioner received no foreign funds till opening of FCRA account
Petitioner, a non-for profit
company, was registered under section 11(1) vide letter date 26.05.2015 issued
by respondent. Petitioner had submitted annual reports electronically on a year
to year basis from financial years 2015 to 2019 to concerned authorities. Foreign
contribution (Regulations) Act, 2010 was amended by Amendment Act, 2020. Pursuant
to said amendment, notification was issued by respondent specifying that
details of FCRA account and receipt of foreign contribution 'as on 31st March
of year ending' had to be provided in form FC-4 (Annual Returns). It was noted
that amendment had been introduced only in September 2020 and respondent's
online portal had been designed in a manner such that it was impossible for
petitioner to submit form FC-4 online for a period prior to 29.09.2020, i.e.,
for a period before which amendment pursuant to 2020 Amendment Act would apply
and thus, petitioner could not file returns for years 2019-20 and 2020-21. Since
petitioner opened its FCRA account in August, 2021 and as on 31.03.2020,
Foreign Contribution Regulation (Amendment) Act, 2020, had not come into
effect, petitioner was accordingly, permitted to fill up details of its FCRA
account in form FC-4 and submit same. No coercive steps would be taken against
petitioner for having opened FCRA account belatedly, inasmuch as it was case of
petitioner that no foreign contribution had been received by them in financial
years 2019-20 and 2020-21. – [WNS Cares Foundation v. Union of India (2023) 177
SCL 57 : 146 taxmann.com 386 (Del.)]
Petitioner faced
difficulties in uploading FCRA annual return for financial year 2019-20 due to
fact that FCRA bank account details were being sought as of 31.03.2020,
however, petitioner had opened designated FCRA bank account with SBI belatedly,
in view of fact that petitioner had paid penalty amount, annual return for
financial year 2019-20 which had been uploaded by petitioner, would be taken as
valid without any payment of further penalties by petitioner
Petitioner, an NGO, was registered under section 11(1) of 2010 Act. 2010
Act was amended by Amendment Act, 2020. Said Amendment Act mandated opening of
an Foreign Contribution Regulation Act (FCRA) bank account with State
Bank of India Sansad Marg Branch. Petitioner faced difficulties in uploading
FCRA annual return under form FC-4 for financial year 2019-20 due to fact that
FCRA bank account details were being sought as of 31.03.2020. It was noted that
petitioner had opened designated FCRA bank account with SBI belatedly, i.e. on 04.10.2021.
Petitioner also deposited penalty amount
with respondent for such delay in opening FCRA bank account - Petitioner also
uploaded annual return for financial year 2019-20. Prayer for refund was not
tenable and was rejected, however, FCRA FC-4 annual return for financial year
2019-20 which had been uploaded, would be taken as valid without any payment of
further penalties by petitioner. [Helping Hands Jaipur Society v. Union of India (2023) 152 taxmann.com
542 (Del.)]
Application of foreign contribution divergent from
trust’s objects sufficient for initiating reassessment
Delhi High Court upholds reassessment proceedings
against Enviornics Trust observing that wrongful application of foreign
contribution by the trust, basis tangible and concrete information, sufficient
for Revenue forming a belief that income escaped assessment; High Court takes
cognizance of narrow scope of judicial review in relation to testing the
validity of reassessment proceedings; Relies on co-ordinate bench ruling
in Acorus Unitech Wireless (P) Ltd v. ACIT
(2014) 362 ITR 417 (Del.) to observe “the Assessing Officer based its opinion on tangible and
concrete information in the form of Trust Deed and statement of Managing
Trustee that certain identified foreign contributions were utilized for a
purpose divergent to its object as disclosed in the Trust deed, accordingly,
wrongful application of the exemption availed under Section 11 / Section 12 in
relation to such funds would undoubtedly result in the Assessing Officer
forming the subjective satisfaction that the wrong availed exemption vis-à-vis
foreign contributions escaped assessment”; Further relies on Supreme Court
ruling in Prestige Lights Ltd v. SBI to observe “an individual seeking to
invoke the equitable jurisdiction of a High Court must approach this Court
displaying bona fides”; Finds that the Assessee suppressed material
facts regarding cancellation of its registration under Section 12A, 12AA and
12AB and remarks that this ground was sufficient enough to reject the instant
petition, however, in the interest of justice, High Court deals with the issues
of validity of reopening; Assessee, a trust engaged in work related to
ecological and environmental conservation, registered under FCRA with object of
‘social nature’ and was entitled to receive foreign contribution; A survey was
conducted on the Assessee wherein no incriminating material was found, however,
books of accounts / financial documents and mobiles phones were seized; For Assessment
year 2016-17, information in relation to the foreign contributions received and
utilized by the Assessee under FCRA was sought; Subsequently, after a period of
6 years, a show cause notice was issued on account of escapement of income of
Rs. 2.23 Cr. for wrongful claim of foreign contribution under Section 11;
Revenue held that there was apparent inconsistency between the purpose declared
under the FCRA and return filed vis-a-vis the activities undertaken by the
Assessee on ground; Assessee contested that the expanded position under Section
149(1) wherein escaped income in the form of an asset, expenditure linked to a
transaction, or an entry in the books, exceeding Rs.50 Lacs could be held to
have escaped assessment, was applicable from 01.04.2022, thus could not be
applied for Assessment year 2016-17; Further argued the Revenue ought to have
requisite material / information to arrive at a subjective satisfaction that
there was an escapement of income of Rs. 50 Lacs represented in the form of an
asset; Revenue highlighted that the Assessee’s status is submitted as a
charitable trust, however, the registration of the Assessee under Section 12A
and 12AA was cancelled qua Financial year 2013-14 to 2020-21 and registration
under Section 12AB was also cancelled from Financial year 2021-22 onwards and
hence, the petition ought not to be admitted; High Court notes that Explanation
to Section 149 clarifies that ‘deposits in bank accounts’ form a part of the
‘assets’ and thus rejects Assessee’s argument of expiry of limitation in
relation to the issuance of notice under Section 148 as the income escaped
assessment of R. 2.23 Cr exceeds the minimum threshold of Rs. 50 Lacs; High
Court opines “the limitation vis-à-vis the initiation of reassessment
proceedings in the case herein would resultantly extend to 10 (ten) years in
light of the fact that the Assessing Officer had in its possession inter alia
books of accounts evidencing voluntary deposits in bank accounts extending to
more than Rs. 50 Lacs”; Thus, declines to interfere and disposes of the
writ petition. [In favour of revenue] – [Enviornics Trust v. DCIT [TS-665-HC-2023(DEL)]
– Date of Judgement : 08.11.2023 (Del.)]
Rules on taxability of foreign donation for trust
not registered under Section 12A
Patna ITAT holds that donations received without a
specific direction of forming part of corpus of trust would fall within ambit
of ‘income’ of a trust derived from property and includible in total income;
ITAT remarks that even for the sake of argument if it is accepted that the
donation was towards corpus fund, still the donation will form part of taxable
income as the trust was not registered under Section 12A; During Assessment
year 2011-12, Assessee, a Trust not registered under Section 12A received
donation of Rs. 57,25,000/-from
the US-based Association Akshy Patriarca, for infrastructural development and
other development and showed it as ‘development fund’ in its ‘receipt and
payment account’ but not in ‘income and expenditure account’; Thus, claimed to
be a capital receipt; Revenue disallowed Assessee’s claim of capital receipt
and held that the exemption for donation received towards corpus fund was
available to a trust only if the same was registered under Section 12A; CIT(A)
dismissed Assessee’s appeal and held that foreign contribution given without
any specific direction or instruction will definitely form part of total
income; Before ITAT, the Revenue relied on coordinate bench ruling in Veeravel Trust v. ITO (2021) 129 taxmann.com 358 (ITAT Chennai) and contended that
voluntary donations received under a specific direction forms part of corpus
and would fall within the ambit of ‘income’ of trust in absence of registration
under Section 12A; ITAT refers to Circular 551 dated 23.01.1990 wherein the
intention of legislature to amend Section 2(24) vide Direct Tax (Amendment)
Laws, 1987 and 1989 was elaborated and it was stated that corpus donations
would be treated as income in hands of the recipient in case the trust
complies with the requirements of exemption under Section 11, however, the
corpus donation will fall within the ambit of taxable income, in case
trust loses exemption under Section 11 or have not complied with the condition
laid down in Section 12A; Observes that admittedly the Assessee has not
been registered under Section 12A, therefore, the exemption provided under
Section 11 and 12 would not be available to the Assessee for the year under
consideration and the benefit of pre-amended Section 2(24)(iia) at the time of
its insertion from 01.04.1973 could not be provided due to subsequent amendment
in the year 1987 and 1989 and accordingly, corpus donation would be treated as
income in the hands of the recipient in absence of fulfilment of condition of
Section 12A; Rejects Assessee’s contention and observes that on perusal of
confirmation letter from the donor it cannot be said that donation will form
part of corpus fund, rather, a liberty has been given to Assessee to use it for
trust activities in consultation with the chairman and under such circumstances,
the said donation, does not strictly conform the as the donation towards corpus
fund; Accordingly, dismisses Assessee’s appeal. [In favour of revenue] – [Akshay
Educational & Social Welfare Charitable Trust v. DCIT, Gaya [TS-20-ITAT-2023(PAT)]
– Date of Judgement : 11.01.2023 (ITAT Patna)]
On perusal of balance sheet of appellant-trust, it
appeared that involvement of appellant-trust in welfare activities was very
very meagre even less than 1 per cent which showed that it was more involved in
commercial activities than welfare activities for which it was created, its
application under FCRA to get foreign contribution to carry out welfare
activities was rightly rejected
Appellant-trust was created for purpose of carrying
out public religious objects and purposes wide enough for extension of benefits
thereof to all, irrespective of class, community, relief of poor, education,
medical relief and advancement of any object of general and/or public utility
and so that such benefit may be given directly by said trust. It was also
registered as a public trust under section 12AA of Income-tax Act, 1961. In
order to get contribution in and around globe to carry out various welfare
activities appellant filed application before respondent to get foreign contribution
under Act. Said application was rejected by respondent on ground that there was
a wide gap between earnings made by appellant and expenditure done on welfare
activities, and that appellant NGO was likely to use foreign contribution for
personal gains. On perusal of balance sheet of appellant it appeared that
involvement of appellant-trust in welfare activities was very very meagre even
less than 1 per cent of its earnings which showed that appellant was more
involved in commercial activities than welfare activities. Since acts performed by appellant-trust were
not in accordance with constitution of trust, rejection of application of
appellant-trust by respondent was genuine and justified. – [Poondimadha
Religious Trust v. Secretary to Government of India (2019) 111 taxmann.com 542
(Mad.)]
Delay in filing annual return under FCR Act is
punishable under section 37 of FCR Act, 2010
The heading of section 37 of
FCR Act “Penalty for offences where no separate punishment has been provided”
cannot be relied upon to argue that provisions of Section 37 of the FCR Act
would be applicable only in circumstances where an offence is specified under
Chapter-VIII of the FCR Act but no punishment has been prescribed. This is so
since the section unambiguously provides that “Whoever fails to comply with any
provision of this Act for which no separate penalty has been provided in this
Act shall be punished with imprisonment for a term which may extend to one
year, or with fine or with both”. The plain language of Section 37 of the FCR
Act clarifies that the punishment, as specified, would be applicable in case of
non-compliance of any provision of the FCR Act for which no specific punishment
is prescribed. The heading of a section of an enactment may be used as an aid
for interpretation of that section but does not control the meaning or import
of the section where the language of the section is free from ambiguity. In
view of the above, the contention that delay in filing of the annual return
under the FCR Act is not an offence, is rejected. [In favour of revenue] – [Mizpah Charitable Trust v. Union of India (2022) 142 taxmann.com 318 (Del.)]
Amendment to sections 7, 12A and 17 vide Foreign Contribution (Regulation) Amendment Act, 2020 provides regulatory mechanism to ensure that foreign contribution received from foreign source is utilized only for purpose by recipient itself for which it has been so permitted and purpose of said amendment is also to identify key functionaries of registered association so that they can be made accountable for violations, if any, said amendments are intra vires Constitution and, thus, cannot be said to be irrational, arbitrary and unreasonable
Amendment to section 7 of 2010 Act vide Foreign Contribution
(Regulation) Amendment Act, 2020 prohibits transfer of foreign contribution to
other person, which was otherwise permitted under unamended provision and
legislative intent of said amendment is to introduce strict dispensation qua
recipient of foreign contribution to utilize same 'itself' for designated
purposes for which it was permitted. Fact that earlier transfer of foreign contribution
was permitted as per unamended provision, that by itself cannot be basis to
challenge validity of the amended provision as it is open to Parliament to
change benchmark of restriction from higher standard to lower standard or vice
versa on basis of exigencies and experience gained during implementation of
applicable provision at relevant time. Insertion of new section 12A vide
amendment Act of 2020 mandates office bearers of recipient of foreign contribution
(registered organizations) to provide identification document so that they can
be made accountable for violations, if any. Amended provisions of section 17
mandates that FCRA accounts of all registered persons are required to be opened
in one particular branch in country providing for essential information and
fields, thereby ensuring a complete and transparent check on inflow and
utilization of foreign contribution towards a single point source on real time
basis. Since, amended provisions namely sections 7, 12A and 17 are intended to
remedy mischief of endless chain of transfers of foreign contribution creating
layered trail of money making it difficult to trace flow and legitimate
utilisation thereof, same are intra vires Constitution and same cannot be said
to be irrational, arbitrary and unreasonable. – [Noel Harper v. Union of
India (2022) 137 taxmann.com 130 (SC)]
Upholds revision over veracity of donations, inadequacy of FCRA Form-FC6
Assessee, a registered
charitable organisation filed its return of income for Assessment year 2015-16,
declaring “NIL” income, which was accepted by the Assessing Officer under scrutiny
assessment. CIT, observing that the assessment was completed by the Assessing Officer in a perfunctory and
routine manner, without any cross verification, cross checks and test checks,
issued a show-cause notice for revision of its assessment under section 263. The CIT observed that donations received
by Assessee included foreign contributions to the tune of Rs. 11.97 Cr. which
was accepted without seeking any clarification about the details of the donors
or any correspondence with them. The CIT called for details related to foreign
donations in the revisionary proceedings, w.r.t. name, address and PAN of the
donors. However, despite repeated requests for such information, the Assessee
failed to provide complete information. The Assessee furnished a copy of Form
FC 6, which was filed under FCRA for purposes of RBI verification in respect of
foreign donations. The CIT noted that such form did not contain complete
particulars as required for verification purposes, but just had reference to
the country from which such donations were received. Subsequently, the CIT
passed an order under section 263 directing the Assessing
Officer to conduct a fresh
assessment verifying details of the foreign donations, and after affording the
Assessee sufficient opportunity of being heard. The Assessee preferred an
appeal with the ITAT against the CIT’s order under section 263.
ITAT dismisses Assessee’s
appeal, upholds CIT’s revisionary order for Assessment year 2015-16;
Assessee-Charitable Trust filed its return of income disclosing “nil” income,
was assessed under section 143(3) whereby the Assessing
Officer accepted the returned income; CIT observed that Assessee’s case was
picked up for scrutiny u/s 143(3) on account of: (i) receipt of donations and
(ii) incurring huge expenditure on charity, CIT noting that the assessment had
been concluded in a perfunctory and routine manner, passed a revision order under
section 263, directing the Assessing Officer to conduct a fresh assessment,
Assessee challenged the CIT’s exercise of revisionary jurisdiction; ITAT
observes that during the year, Assessee received foreign donations aggregating
to Rs. 11.97 Cr., notes that despite repeated call for information relating to
donors in assessment as well as revisionary proceedings, the Assessee has
failed to furnish complete details; ITAT further notes that Form FC 6 under
Foreign Contribution (Regulation) Act, 2010 (FCRA) as submitted by
the Assessee in respect of foreign donations contains inadequate particulars
restricted only to the country from where donation is received; Notes CIT’s
observation that the Form FC 6 is for RBI verification, and more powers are
vested with the Assessing Officer to verify the genuineness and veracity of
foreign donations; Notes that Assessing Officer in the course of assessment
called for certain details, but abandoned the pursuit of verifying the adequacy
of particulars furnished, and summarily accepted the information furnished;
Holds that the assessment in instant case was both erroneous as well as
prejudicial to interest of Revenue within section 263; ITAT finds no infirmity
with the CIT’s order, upholds the same, and directs the Assessing Officer to
carry out fresh assessment. [In favour of revenue] (Related Assessment year :
2015-16) – [Alimaan Charitable Trust v. CIT [TS-505-ITAT-2021(Mum)]
– date of Judgement : 21.06.2021 (ITAT Mumbai)]
Proceedings under FCRA
could not have been dropped against respondent on basis of defence taken by
respondent that gifts were received by respondent from his NRI father, out of
latter’s personal funds through normal banking channels and were outside
purview of FCRA, as correctness of defence whether amounts received by
respondent were from his NRI father or not was a serious factual dispute
Proceedings were initiated against respondent on
ground that he while serving as Legislator in Punjab assembly, received foreign
contribution in violation of provisions under FCRA. High Court by impugned
order held that gifts were received by respondent from his father who was NRI
out of latter's personal funds through normal banking channels, hence, were
outside purview of FCRA, as same could not be said to be received from a ‘foreign
source’ and accordingly dropped proceedings under FCRA against him. However, it
was only in defence that respondent had submitted that funds which were
received, were gifts from his father, an Indian passport-holder. Correctness of
defence whether such amounts were received by respondent from his father or not
was a serious factual dispute and was to be gone into only after appreciating
evidence during trial. Thus, it was not an admitted position, as recorded by
High Court. Merely, by referring to statements alleged to have been made by
father of respondent, and also on behalf of one of entities, High Court had
committed an error in recording a finding in favour of respondent. Therefore,
impugned order passed by High Court was to be set aside. – [Central Bureau of Investigation v. Arvind
Khanna (2019) 156 SCL 798 : 110 taxmann.com 343 (SC)]
Assessee-trust received donation from a Canadian donor towards construction and maintenance of a hospital and a school and assessee utilised said donation accordingly, exemption could not be denied to assessee in respect of such donation
The
assessee-trust received donation from a charitable foundation of Canada, SNCF.
The Assessing Officer based on the data of the Canadian resource agency website
was of the opinion that the expenditure incurred by the assessee were against
the directions of SNCG Canada and assessed the difference as income and raised
demand. The Commissioner (Appeals) allowed appeal of the assessee observing
that the assessee trust had submitted a letter from the president of the donor
agency (SNCF) dated 15.04.2014, confirming the scope of the agency agreement
covering the expenditure towards the construction and maintenance of the
Hospital and Research Centre and construction and maintenance of the School.
Held that the assessee has complied with the FCRA
provisions for donations received for the purpose of health and educational
programme as per the mandate of the Canadian donor and the assessee claimed
such expenses as application of income for school and hospitals. Considering
the apparent facts, evidence, activities and the FCRA provisions and
clarificatory explanation of the authorized representative and duly
signed documentary proof, it was not necessary to interfere with the order of
the Commissioner (Appeals). [In favour of assessee] (Related Assessment year :
2006-07) – [DCIT (Exemptions) v. Om Sakthi Narayani Siddar Peedam Charitable
Trust (2016) 47 ITR(T) 787 : (2017) 82 taxmann.com 352 (ITAT Chennai)]
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